Pandora’s Big Bet. Consumers Will Pay Big Money For Music Again.

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    The streaming pure-play is banking on the fact that millions of American consumers, who’ve gotten into the habit of not paying much, if anything at all, for music, will pay a monthly fee for their service.

    Pandora now has 4 million paid subscribers. Pandora executives are expecting 9.5 million consumers to pay $4.99 per month by 2020 for its new Pandora Plus service. And, 11 million consumers to pay $10.00 per month by 2020 for its Premium service, which will be unveiled next month. If those goals are met, Pandora expects to be a $4 billion business by 2020.

    Pandora says it now has 80 million monthly listeners tuning in for about 22 hours every month. The product is available on 1800 devices and in 190 car models. At an investor day Tuesday, CEO Tim Westergren said, from feedback, users told the Company they wanted the ability to replay songs, they wanted unlimited skips, and they wanted the ability to listen offline. Westergren said that feedback was incorporated into Pandora’s two new subscription services based around “ease of use.” He calls this shift in the business model a profound transformation in Pandora’s business and product.” Westergren also said the company has seen tremendous growth in its new Pandora Plus product since its launch just a few weeks ago.

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    Last month Pandora, launched its $5-per-month service that removes ads and offers offline playback and more skips. But it may be too little too late. Spotify also has a $10.00-per-month service that removes ads, provides offline playback, and lets you listen to exactly what songs you want whenever you want. Spotify CEO Daniel Ek said last month that Spotify has 40 million paid subs. Apple claims to have 17 million subscribers for its Apple Music product.

    iHeartRadio is getting set to launch two paid services as well. The new on-demand subscription services will be called iHeartRadio Plus and iHeartRadio All Access. The cost of the two services is still being worked out. The company says, “iHeartRadio’s new on-demand offerings will allow listeners to bridge the divide between music discovery and music collecting by seamlessly incorporating true interactivity into the radio-listening experience, through a variety of new features.” iHeart also has the ability to incorporate hundreds of its radio stations into the service.

    The big question is how many consumers will actually pay a monthly subscription service for music, and can everyone in the space survive. Pandora executives are betting their product is so good that consumers will once again “pay for music and value music again.” Another question: What if consumers decide all the products are equally good and one or two of the providers decide to offer it at half the price? For Google, Apple, or Amazon, streaming music is not their core business.

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